Question

Dallas Star Inc. 's stock has a 35% chance of producing a 10% return, and a 60% chance of producing a 15% return. What is the firm's expected rate of return? What is the firm's Standard Deviation? What is the firm's Coefficient of Variation? Part 2: Calculate the required rate of return for Dallas Star Inc., assuming that (1) investors expect a 3.0% rate of inflation in the future, (2) the nominal risk-free rate is 5.0%, (3) expected market return is 11% and (4) the firm has a beta of 1.50. (Hint: You need to find out market risk premium first.)

Answer 1

Answer:

1.The expected return is the profit or loss that the investor anticipates on the investment =0.125 that is 12.5%

2. RRR (Required rate of return) =11%.

Explanation:

Please also refer to the attachment .